FASB Accounting Standards Codification Topic 326, Financial Instruments—Credit Losses

For financial assets measured at amortized cost, the allowance represents expected credit losses over the contractual term using relevant historical experience, current conditions, and reasonable and supportable forecasts. The method may vary with the portfolio; the evidence chain may not. Pooling by similar risk characteristics, individual assessment when appropriate, off-balance-sheet exposure, writeoff, recovery, and disclosure require separate controls.

ASU 2025-05 is current for periods beginning after December 15, 2025. Its practical expedient and narrower policy election are choices within defined scope, not permission to omit an expected-loss estimate.